Rebekha Sharkie (Mayo, Nick Xenophon Team) Share this | Hansard source

Mr Speaker, I commend the government for taking this key step to combat multinational tax avoidance. Until now, too little has been done to recover the unpaid tax that is rightfully owed to Australians. The additional burden that hardworking Australians and taxpaying businesses bear as a result of multinational tax avoidance should not be understated. Whilst standing orders prevent me from moving amendments to further strengthen taxes in a bill, there are still changes that I strongly urge the government to incorporate into the final version of the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017.

Currently, this proposed tax only applies to the very biggest of businesses, namely, 'significant global entities' with an annual global income of $1 billion or greater. The Nick Xenophon Team believes that this threshold should be reduced from $1 billion to $250 million. Whilst I appreciate that the Australian Taxation Office faces significant difficulties when chasing multinational tax avoidance, a company with $250 million in annual global income is still a very big business. Indeed, this would align with the Australian Taxation Office's own classification system, which rightly identifies companies with turnover levels of $250 million or greater as large businesses.

Secondly, the 'sufficient foreign tax' test should become more stringent. Naturally, tax rates between countries will differ, but this bill proposes that the diverted profits tax would only activate when tax reduction strategies result in a 20 per cent or more reduction in total tax paid. The Nick Xenophon Team believes that this threshold should be lowered to 10 per cent, such that, in the technical jargon, 'the foreign tax liabilities of foreign entities resulting from tax avoidance schemes is 90 per cent or more of the reduction in the tax liability'. This would also further reduce the incentive to shift genuinely Australian-based business offshore just to take advantage of lower taxes elsewhere.

I also urge the government to consider how to reverse as much as possible the burden of the enforcement of the diverted profits tax from the Australian Taxation Office and onto multinational companies. The accounting trail for multinational companies is notoriously opaque and complex. Even the government tax departments have difficulty in finding the web. For example, one possible approach could be to require up-front disclosure by multinational companies if they believe they may have transactions that would attract a diverted profits tax, to be combined with significant penalties for failing to disclose. I believe this would dramatically assist the Australian Taxation Office in their efforts to investigate potential multinational tax avoidance.

This bill is only the starting point on a range of measures that the government should consider in strengthening Australia's ability to recover unpaid tax from multinationals. Multinational tax avoidance is particularly widespread in the big tech giants. In 2014, an investigation by The Australian Financial Review concluded that between 2002 and 2013 Apple had shifted an estimated $8.9 billion in unpaid taxes from its Australian operations to tax havens in Ireland. Although the numbers are secret, the tax-dodging strategy is not. The same investigation by The Australian Financial Review referred to Apple Sales International 2009 accounts, which state:

The company is not tax resident in any jurisdiction …The average tax rate for all jurisdictions in which it operates is approximately 4 per cent.

This is absolutely utterly appalling.

The huge multinationals of Facebook and Google are no different. These two companies have a duopoly on online advertising that is only strengthened with every passing week and month. Digital advertising is the biggest source of advertising revenue in the local media sector and, to echo the comments of my colleague Senator Xenophon, he believes that many politicians:

… don’t realise the commercial and social impact they are having, particularly on the ability of Australian media companies to provide news and local stories.

Although Google earned an estimated $2.5 billion in income from local advertising in 2015, it only declared revenue in Australia of one-fifth that amount. Google paid just $16 million of tax that year, a paltry 0.64 per cent—just a fraction of one percent—of its estimated revenue of $2.5 billion. This means that Google is only paying $1 of tax for every $157 they earn in revenue. This is a tax rate that any person in this chamber, and certainly any Australian, would be absolutely envious of. But it is wrong, and it needs to change.

Facebook Australia is wholly owned by Facebook, its parent company in the US. By market capitalisation, Facebook is a $400 billion company, and it makes more than $1 billion in profit every three months. These figures are absolutely staggering in their size. Yet, in 2015, Facebook Australia's gross revenue figures were reported to be a measly $33.5 million. Investment bank Morgan Stanley estimated that Facebook Australia actually earned between $500 million and $600 million from advertising in our country in 2015, yet Facebook Australia only paid $814,000 in tax. This is absolutely disgusting. Facebook, Google, Apple and a plethora of other multinationals are absolutely dudding the Australian people. Let's be very clear: this is taking money out of our schools, this is taking money out of our hospitals, this is taking money away from pensioners and this is taking money away from aged care.

Australian workers and businesses who do the right thing are labouring hard under taxes to afford the services our community needs and to try to close our budget deficit, but some big businesses seem to believe that they are more equal than others and that these taxes do not apply to them. We need to get better at clawing back these millions and billions of unpaid taxes. To quote The Australian:

… Facebook and Google have made billions out of being innovative businesses, we need to find innovative ways to make them pay back a fair share of their profits to the companies they are taking content from.

In relation to Google and Facebook, one idea that should be considered is requiring them to pay a content fee to host Australian media stories. This would allow local media companies to compete more effectively with the Google and Facebook duopoly. This is not a flight-of-fancy idea: the European Commission is actively investigating a similar proposal for the European Union. As my colleague Senator Xenophon said:

… Facebook and Google’s market dominance amounts to unfair competition. They cannibalise existing media outlets, which provide content, which they sell on for vast profit. It’s critical they pay their fair share of tax, but we need more than a super profits tax.

Or, may I add, we need more than just the proposed diverted profits tax.

Another idea that warrants full investigation and consideration is the possibility of taxing companies according to metrics other than profit, such as input costs. According to Professor John Mangan from the University of Queensland:

In this way society gets a return on the use of all scarce resources; discouraging inefficient resource use and providing firms with incentives to minimise costs.

The incentive for transfer pricing disappears as firms now want to minimise rather than maximise internal costs of production or operation. One way in which they may do this is to reduce discretionary internal costs such as executive salaries.

Unitary taxation with profit apportionment agreements may be another approach that could be considered in international bilateral or multilateral tax treaties. Recommendations from the Senate Economics Reference Committee's two reports on corporate tax avoidance in 2015 and 2016 also provide very useful ideas for the government to act upon.

In summary, I support the government for taking a moderate but constructive step towards addressing multinational tax avoidance, and I urge the government to strengthen this bill by reducing the significant global entity threshold to $250 million, further tightening the sufficient foreign tax test and considering penalties for multinationals who do not disclose that they may have diverted their profit tax liability. I encourage the government to view this bill as an instalment towards ensuring that everyone in Australia who directly benefits from the Australian economy pays their fair share of tax so that those of us who do the right thing—small businesses in particular—do not have to bear an unfair burden compared to those who do not. That will fund our hospitals, that will fund our education system and that will provide funding for the most disadvantaged in our society.

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